Leases: granting of a lease: reverse premiums
A ‘reverse premium’ is a sum paid by the landlord in order to induce the tenant to enter into the lease. Reverse premiums are a common feature of lettings of commercial properties. Typical situations in which the payment of reverse premiums may be met are:
- where a developer wishes to sell a newly built office block to an investment company and wishes the property to be fully let at the time of the sale;
- where the developer of a shopping centre wishes to secure a well-known name (often referred to as an ‘anchor tenant’) in order to attract other tenants to the development.
A payment made by a tenant, either to surrender or assign an onerous lease, may also be referred to as a reverse premium. The treatment of such payments is covered at CG71264-CG71265.
A more comprehensive explanation of the commercial background to reverse premiums is contained at BIM41050 onwards.